We show that a global imbalance risk factor that captures the spread in countries' external imbalances and their propensity to issue external liabilities in foreign currency explains the cross-sectional variation in currency excess returns. The economic intuition is simple: net debtor countries...

This paper is first to establish profound evidence on the existence of a low-risk anomaly in currency markets. In particular, I discover a novel strategy in currency forward markets that is long in currencies whose higher return moments are low relative to past levels and short in currencies...

In this paper we derive the measure of position-unwinding risk of currency carry trade portfolios from the currency option pricing model. The position-unwinding likelihood indicator is in nature driven by interest rate differential and currency volatility, and highly correlated with global...

This paper employs the post — Least Absolute Shrinkage and Selection Operator (post — LASSO) to make rolling 1-month--ahead currency excess return forecasts using all other currencies' lagged forward discounts as candidate predictors. The trading strategy of buying (selling) quintile...

We construct mean-variance optimized currency portfolios and analyze the time- series variation of the conditional Sharpe ratio. Returns, volatility and skewness are predictable. Market timing – i.e., trading more (less) aggressively when the conditional risk-return trade-off is more (less)...

This paper presents the first evidence that retail investors play a central role in a speculative attack. Investigating the attacks that affected several emerging economies in the second semester of 2018, I document a strong influence of investor attention on the price and risk of the currency...

This paper examines the conditional time-varying currency betas from five developed markets and four emerging markets. We employ a modified trivariate BEKK-GARCH-in-mean model of Engle and Kroner (1995) to estimate the time-varying conditional variance and covariance of returns of stock index,...

In this paper, time-varying market and currency risks among a selected set of developed and emerging economies are compared in terms of stochastic dominance. For this purpose, time-varying exchange rate exposure and market betas are obtained through a multivariate model that explicitly allows...

This paper attempts to find evidence for sign asymmetry of exchange rate exposure. An extended classification of the sources of asymmetry has been introduced in place of somewhat incomplete classification suggested by previous studies. In addition, a new measure is suggested in order to estimate...

This paper uses time-varying second moments to investigate exchange rate exposure betas. Using a BEKK-GARCH(1,21)-M model, time-varying exchange rate exposure betas are obtained with explicit focus on the non-orthogonality between exchange rate changes and market returns. We look into certain...